Jupiter Fund Management higher after performance fees exceed expectations

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Jupiter Fund Management PLC (LON:JUP) ended 2020 with its assets under management at a record high after the acquisition of Merian Global Investors in July.

The acquisition of Merian brought with it £16.6bn of assets under management (AUM). Although Jupiter saw net outflows of £4bn in 2020 (versus net outflows of £4.5bn in 2019), AUM ended the year 37% higher at £58.7bn compared to £42.8bn at the end of 2019.

Net management fees in 2020 totalled £384.0mln, up 4% from £370.0mln in 2019.

Statutory profit before tax, which includes costs related to the Merian acquisition, fell 12% to £132.6mln from £151.0mln in 2019 while underlying profit before tax rose 10% to £179mln.

A final dividend of 17.1p has been proposed plus a special dividend of 3p, making the total dividend for the year 20.1p, equivalent to 70% of the underlying earnings per share for 2020.

Andrew Formica, the chief executive of the fund management firm, said the Merian acquisition had exceeded Jupiter’s expectations, delivering larger than expected synergies.

“While more time is needed to stabilise flows from certain products, these near-term challenges were well-anticipated and factored into the terms of the deal, giving substantial protection to our shareholders,” Formica said.

“Market volatility weighed heavily on investor sentiment resulting in net outflows for the year, gross inflows were robust at £16.5 billion, and, pleasingly, Jupiter branded strategies recorded three consecutive quarters of positive net flows,” Formica said.

Shore Capital said it was a strong set of results “predominantly due to an unexpectedly large beat on performance fees (£73.6mln said to come from Merian UK equity funds and alternatives, compared to a range of zero to £15m in the previous 8 years and zero in H1 ’20)”.

The broker rates the shares as no more than a “hold” but any commentary on the repeatability of the high performance fee could prompt it to revise its view.

“At last night’s closing share price of 292p and before any change to forecasts (provisionally no change but performance fees potentially set to play a bigger role going forward), Jupiter currently trades on 11.8x current Dec ’21 company-compiled consensus of 24.8p (underlying PBT £169.1mln). Without further guidance on how the dividend policy will be operated going forward, it is tricky to judge the likely 2021 yield,” Shore said.

“A straight 50% of 24.8p would obviously be only 12.4p but given the board chose to payout 60% on the ordinary in 2020, we assume it will look to at least hold this level which would be a 70% payout before any special. Therefore, 17.1p would be a prospective Dec ’21 dividend yield of 5.9%,” it calculated.

The broker’s fair value estimation of the shares is 270p “with yield support providing backstop assuming the ordinary is allowed to go to a 70% payout”.

Shares in Jupiter were up 2.3% at 298.8p in lunchtime trading.

 

— adds broker comment and updates share price —

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